Insurance Riders are the extra benefits that can be purchased and covered for under the life insurance policy. Apart from the basic Life insurance cover, you can choose to add extra benefits to your policy by paying an extra premium. Read the policy document of the company for exact wordings and the conditions that apply. Let us see all the insurance riders one by one.
- Accidental Death Rider
In this rider, you get additional sum assured if the death occurs due to an accident. The biggest myth which investors have is that they will get the money if death is due to accident only if this rider is added, else not. This is not true. If you don’t take this rider, still the base Sum assured will be paid to you. This rider is only for the extra sum assured in case of death due to accident at additional cost, nothing else. So if you take a policy of 1 Crore sum assured with accidental rider of 25 lacs, you will get 1 Crore in case of death due reasons other than accident and 1.25 Crores in case of death due accident. See Term Life insurance policies offering this rider.
- Permanent or Temporary, Partial or Total Disability
This rider is helpful in case you are disabled permanently or temporarily due to an accident. In that case, most of the policies pay a lump sum or periodically for a set duration. The amount paid is a percentage of Sum Assured. For example, a policy could pay a given amount per month as per policy conditions while the insured is hospitalized. This way, this rider acts like an income protection/replacement plan. Most insurance companies offer this rider only in case of disability due accident.
- Critical Illness
This rider gives you a lump sum benefit amount if you are diagnosed with a critical illness. Generally all the major illnesses are covered in Critical Illness cover. Some of the examples of critical illness mentioned are Heart Attack, Cancer, Stroke, Coronary artery by-pass graft surgery (CABG), Kidney failure and Paralysis. After the critical illness is detected, the policy might continue or terminate as per the policy document. At times, the policy coverage reduces by the amount paid to you.
- Waiver of Premium
This rider makes sure that in case you are not able to pay future premium due to disability or income loss, the future premiums are waived off but your policy is still in force. This is in a way insurance of the premium payment till your policy expiry date. In case this rider is not present and you are disabled and not able to pay the premiums, then the policy will expire and you will not get any benefit later when you die due to non-payment of premium.
- Income Benefit Rider
This rider is present in some policies and it’s mainly for the income generation after the death of the policyholder. If this rider is present, the policy holder’s family will get additional income per year for 5-10 yrs along with regular Sum Assured. For example, 10% of Sum Assured for next 10 yrs will be received by the policy holder’s family.
These Insurance Riders come with additional cost and are subject to exclusions under certain conditions.
Note that riders come with cost, so just because they are present in the policy as add-ons, don’t jump and include every kind of rider possible. Ask yourself why you need a rider and if there is really a need for it. Read about the rider rules in details and read what is not included in that rider. Also compare the cost of insurance riders from different companies to take a better decision. Some of the riders really work well and should be taken to cover given risks comprehensively.
By Atul Pandey, Principal Officer, Bimadirect.